Changing How the US Thinks About Drug Pricing

High-cost specialty drugs as a cost driver have increased the need for cost containment strategies that ensure access but reduce overutilization. The problem is that the market allows pharmaceutical companies to, legally, charge whatever they want.

Margaret E. O’Kane, MHA, referenced the 5000% overnight price hike by Turing Pharmaceuticals for Daraprim, a story that broke the day this panel discussion was filmed in September 2015. While it’s a legal move, it shows companies can essentially charge whatever the market can bear.

“They can charge, right now, more or less whatever they want, and then large payers, like Medicaid, and maybe large health insurers, like the VA, and so forth, can negotiate discounts,” Austin Frakt, PhD, explained. “And that’s just how it plays out. But those prices are going up and up and up, particularly in cancer care.”

He cited a suggestion from Peter Bach, MD, MAPP, of Memorial Sloan Kettering Cancer Center, that instead of paying for a drug, thinking about it as paying for what that drug does for specific diseases. So we would pay for the returns that drug delivers in a certain condition instead of the same price across the board.

This system is similar to what many European countries already do with reference pricing, where they group drugs into therapeutic classes that have similar effect and tag a price for all drugs in that class. The model is a different type of reference pricing than seen in the US, specifically in CalPERS.

However, he acknowledges that while pushing the price lower and lower to address the larger budget impact, we still need to be mindful of encouraging highly cost-effective therapies.

“It’s still possible, though, to have a drug that’s reasonably priced from a cost-effective point of view, but is so widely applicable that the total budget impact is huge,” Dr Frakt said.